Thursday, October 09, 2008

Service-Oriented CashFlow

In difficult economic times, the most important business measure for many firms is not profit or revenue growth or cost-saving but cashflow. Which means that the business case for SOA shifts away from relatively boring arguments about cost-saving (economics of scale), and strategic but highly imprecise arguments about flexibility (economics of scope), towards careful comparison of the dynamic economic viability of different business models (economics of governance alignment).

There aren't yet many SOA case studies that talk about cashflow. When I search for "service-oriented" and "cashflow", I keep finding references to a healthcare distribution company Owens & Minor, based in Mechanicsville VA, which started an 4-year SOA project sometime in 2005. (Speed Wins at Owens & Minor, Feb 2005) So nearly finished yet, chaps?

As I've explained in previous posts, the Pay-As-You-Go model has two advantages for the service consumer - better cashflow (because there is less financial latency between expenditure and return) and reduced risk (because you only spend as much as you need). As economic conditions become more volatile, and credit becomes more expensive, both of these advantages become more valuable.

Valuable for the consumer that is. The SaaS vendors (cheerleader Phil Wainewright) quite rightly see this as an opportunity for SaaS. But of course the challenge for the SaaS vendors is how to provide these benefits without themselves incurring excess cost and risk.

Billing and credit control are obviously key elements of the SaaS infrastructure, and some of Phil's clients offer useful services in this space. So are we moving towards a stratified SaaS world: (service-as-a-service)-as-a-service? And what are the economics of that?

Phil Wainewright on CashFlow: A Few Financial Home Truths. For mechanisms for handling billing see Phil Wainewright on Easing the SaaS-to-cash cycle and Marco Seiriƶ (RuleCore) on More CEP SaaS Pain.

Note: for various reasons, we now prefer the term Economics of Alignment. 

Updated 25 October 2013

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